The Great American Delay

By Pat Choate; Pat Choate is a visiting fellow at the Academy for Contemporary Problems, which recently published his monograph and "As Time Goes : TheBy Pat Choate; Pat Choate is a visiting fellow at the Academy for Contemporary Problems, which recently published his monograph and "As Time Goes : TheJuly 6, 1980

IT MAY BE DIFFICULT to believe today, but in 1931 the Empire State Building was completed and the first tenant occupied space less than 14 months from the day ground was broke. In 1941 the Pentagon building was completed 16 months after construction was begun. By contrast, the new Phillip Hart Senate Office Building, begun in 1976, will require at least 7 to 10 years to complete.

These are not isolated examples. They reflect the extraordinary increase in the time required to complete private and public projects across the nation. These delays are decreasing the value of investments, retarding technological advances, slowing American productivity, fueling inflation, aggravating unemployment and concentrating wealth and power in fewer hands by chasing away smaller companies that cannot afford to pay for them.

More ominously, they are hurting major new weapons systems critical for national defense. For example, the Army and the Chrysler Corp. took more than eight years to design, test and produce the first model of the new Abrams XM1 tank, a central part of the U.S. and NATO defense strategy for Europe. Though the Army and Chrysler repeatedly have testified before Congress that technical problems associated with the tank have been solved, last spring the Army announced that full Chrysler production was being delayed from June 1983 until February 1986. Thus, 10 years will be required to produce the 7,058 tanks the Army is buying.

This is all a massive, perilous and unnecessary waste. Government and business frequently have operated well under tight deadlines. President Kennedy's commitment to place an American on the moon before the end of the 1960s obviously was met. In 1975, construction of the Smithsonian Institution's Air and Space Museum was completed on schedule and under cost in less than 35 months from groundbreaking. The Pentagon has long had a relationship with the naval shipyards in Bath, Maine, under which that facility consistently has built, launched and delivered naval vessels under cost and on time.

In other words, Americans surely have a great deal of know-how, but lately we have been running short on "know-when" -- and we have been suffering in many ways as a result. Consider some of the current and prospective consequences of The Great American Delay.

First, it costs to wait.

As much as a quarter or more of all new capital investment in the United States simply finances delay -- going for accumulated interest payments plus inflation-boosted prices.

For example, in the public utility industry the time required to build a new coal or nuclear electric power plant has increased from less than five years in the 1960s to more than 10 years in the 1980s. The result: Approximately $40 billion of the U.S.' $122 billion backlog of public utility capital construction projects is devoted to paying for delay.

Expanding delays have increase the costs of the Tennessee Valley Authority's seven new power plants alone from an estimated $6.8 billion to more than $17.6 billion. Most of this $10.8 billion increase is financing delay. Needless to say, these increased costs are passed on, in part or whole, to the consumer, thus feeding our inflationary cycle.

Second, delay reduces competition and its benefits.

The expenses of delay limit the firms that can participate in the development process. Only those with substantial assets can sustain projects over long, fallow gestation periods before they show returns. Only a few firms, for example, have the resources necessary to undertake projects similar to L'Enfant Plaza in Washington, Embarcadero Center in San Francisco or Quincy Market in Boston, or to develop a new-generation computer, a new aircraft or other major projects. Even these companies have limits on the number of projects they can undertake.

Third, delay retards development of advanced technology.

An increasing number of companies find themselves unable to participate in the creation and production of new technologies -- even technologies with high profit potentials -- because of their inability to sustain high delay costs. Since 1971 the number of patents issued to U.S. corporations has declined annually while those issued to foreign firms has increased steadily. Many U.S. firms are selling or licensing their best technology or even selling entire companies to foreign firms, and a growing number are moving some or all of their research, development and production facilities to other nations.

Fourth, as delay greatly increases government costs, it also obviously reduces its benefits.

For example, in the seven years since the beginning of fiscal year 1974, the Department of Housing and Urban Development's Community Development Block Grant Program has disbursed less than 70 percent of its cumulative $18.6 billion appropriations. At present inflation levels, HUD is losing almost $1 billion of purchasing power a year due to its $6.2 billion backlog.

The District of Columbia has used only two-thirds of the HUD Block Grant funds to which it is entitled. The $78 million unclaimed balance is losing its purchasing power at the rate of $12 million a year.

The Department of Commerce's Economic Development Administration has undisbursed funds for approved but uncompleted projects that date back to the 1960s. EDA's $6 billion accelerated public works program created to combat the joblessness created in the 1974-1976 recession entered fiscal 1980 with more than $600 million of undisbursed funds. The Environmental Protection Agency has an undisbursed backlog of almost $9 billion for previously funded community water and sewerage treatment facilities.

Fifth, the more delays in private and public projects, the more jobs lost.

In the current recession, with construction unemployment nationally at 17 percent and in places as high as 40 to 50 percent, the public works pipeline at the federal, state and local levels has a backlog of more than $100 billion of projects. Self-evidently, if spending of these funds could catchup with intent, hundreds of thousands of construction jobs would quickly be created. In turn, linked industries such as steel, concrete and mechanical controls would also benefit.

Sixth, delay-generated costs threaten the political viability of programs such as environmental protection, worker health and consumer safety.

Attention to these programs has focused generally on the direct costs, such as those created by requirements for firms to clean up their pollutants. But the larger expenses often result from the delay-costs created by inefficient time management in their administration.

For example, in 1979 the actual value of the environmental protection investments made by all businesses and by all units of government in the United States was approximately $42 billion. This is roughly equal to the delay-costs created in the public utility sector -- only one of many sectors affected by delay.

If the delay-costs associated with these programs can be reduced, the basic aims of the programs clearly would become more economically and politically attractive.

Seventh, delay undermines national defense.

The design and production delays of the XM1 tank exist throughout the military. For example, the creation of the Army's new Infantry Fighting Vehicle was initiated in the early 1960s. Yet this weapons system will not become operational until October 1982 -- almost 20 years later. It need scarcely be said, moreover, that all this reduces the number of weapons we can afford.

For example, the PP3C aircraft procurement program will decline from 12 units in fiscal year 1980 to eight units in fiscal year 1981 and then resume production at 12 units a year in fiscal year 1982. Inflation and penalities will add costs of $31 million to the program.

Similarly, the F15 aircraft procurement program has been delayed by reducing production from 60 planes per year to 30 planes per year. This will add more than $381 million to the cost of this program. Or take production of the F16 aircraft. It is being reduced from 180 units to 120 units a year beginning in fiscal year 1982. This will delay completion by at least 22 months and add more than $1.6 billion to its costs.

The basic source of delay is the simple mismanagement of time. Although this mismanagement has many orgins, including private industry, the principal source is government. As government has rapidly expanded the size and scope of its interventions in the economy over the past two decades, virtually all decision-making by entrepreneurs and corporate managers has become shared with multiple government agencies.

The issue here, it should be understood is not the free-marketers' one of whether those interventions are justified. Indeed, many of therm are cherished by private business itself. One need only note Chrysler, or the truckers begging Washington to keep regulating them, to remember that more than a few industries are eager to be protected by the federal government.

The issue, rather, is reducing the time taken to carry out these tasks. This is something that cannot be achieved by single, broad-brush strokes by government. It will involve hundreds, even thousands, of actions which may seem unimportant individually but which together can eliminate a great deal of delay.

The most basic reform needed is the creation of time limits for specific government decisions. These limits should not only be reasonable but well publicized and firmly applied. When the limits are exceeded, the associated costs should be calculated, made known and be considered part of remedial actions.

Congress must hold the executive branch to the task of creating and meeting these deadlines. Its oversight function can serve as a regular means of identifing any laws, regulations and practices that require change to accomplish this.

In addition, beneficiaries of federal and state grant-in-aid programs need incentives for the timely use of grants and other funds. If changing programs and "de-obligation" of funds became a more common practice and well-managed programs were given bonus incentives, those receiving the money would be more inclined to improve their time management.

Mediation is an effective means of reducing delay-creating conflict in both the planning and development stages. For example, through mediation by a neutral third party, the Port of Everett, Wash., in 1977 broke a six-year port development stalemate between development and environmental advocates by creating a development plan acceptable to all.

Finally, unduly long court procedures play a significant role in delays. Many opponents of projects commonly use litigation delays (as others use stalling techinques in Congress) to raise the costs and thus kill projects. There are a number of ways to speed the appeals court review process without sacrificing the quality of any decisions.

Streamlined appellate review processes could be established. All appeals from permit or regulatory decisions connected with a single activity, such as land use, could be combined in a single appellate review process. This would not only speed up decisions,but the use of specialized staffs hopefully would result in better rulings as well. There is little doubt that streamlined judicial and appeals processes can be created that will assure access to all parties.

If we are serious about reversing, the decline in American productivity, the rise in unemployment, persistently high inflation and the deterioration of our military position in the world, we can start by eliminating The Great American Delay. There's little time to lose.